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Syncora objects to confirmation of ResCap reorganization plan

Residential Capital LLC, the bankrupt mortgage-servicing unit of Detroit-based Ally Financial Inc., received about 15 objections this week to the Chapter 11 reorganization plan set for approval at a Nov. 19 confirmation hearing.

Most ResCap creditors support the plan, which is financed in part by a $2.1 billion settlement contribution from Ally. An ad hoc group holding $714 million in 9.625 percent junior notes opposes the plan, saying its members are entitled to payment in full with interest.

The bankruptcy judge, who has already ruled partly against the ad hoc group, is now deciding the extent of the bondholders' liens, which in turn will determine whether they are entitled to full payment.

Some other objections are technical and may be resolved by fine-tuning language in the confirmation order approving the plan. Others go to the heart of the plan proposed by New York- based ResCap.

Bond insurer Syncora Guarantee Inc. faulted the plan for its disparate treatment of bond trusts, some of which will get a larger distribution at the expense of others. Syncora also opposed provisions giving the bond trustees immunity from being sued, even if they allegedly violated or exceeded their powers by agreeing to cut back the amounts of their claims.

Syncora said the plan is fatally defective because it dispenses so-called third-party releases to the bond trustees and others. The U.S. Trustee, the Justice Department's bankruptcy watchdog, objected to plan approval on the same basis, saying there is no justification for such releases.

More than 30 states objected, contending that an overly broad provision in the plan would bar them from enforcing a consent decree regarding restrictions on late fees, third-party fees, attorney fees and force-placed insurance.

Disclosure materials tell holders of ResCap's $2.15 billion in general unsecured claims to expect a 36.3 percent recovery. Unsecured creditors with $2 billion in claims against the so- called GMACM companies are predicted to get 30.1 percent.

The $1.1 billion in third-lien 9.625 percent secured notes due in 2015 last traded on Oct. 18 for 112.125 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. In January, the bonds went for 107 cents.

The $473.4 million of ResCap senior unsecured notes due in April 2013 traded on Oct. 21 for 35.65 cents on the dollar, a 52 percent increase since Dec. 19, according to Trace.